Real estate investment has consistently been a favoured choice among Indians for various reasons. However, individuals who own plots and are considering investing in real estate must carefully consider several crucial factors.
To begin with, it is crucial to assess the market conditions before embarking on such a venture of purchasing a piece of land. It is important to determine whether investing in a particular area will yield profitable returns. If the answer is affirmative, it is essential to evaluate the pros and cons or consult with Sterling Heights, a real estate firm based in Hyderabad, for expert guidance.
Benefits of Investing in Open Plots for Long-Term Returns
1. Cost-Effective Investment
Investing in open plots can be a cost-effective option, especially in India. As compared to independent villas and apartments, vacant land is usually more budget-friendly. Additionally, property taxes on plots are lower than for residential properties. Moreover, the maintenance cost of an open plot is significantly lower than that of a constructed property. Hence, investing in open plots can be a wise financial decision.
2. Lucrative Investment Option
Open plots can offer a lucrative investment opportunity, particularly if they are located in areas with high growth potential. Unlike residential assets, the prices of open plots tend to appreciate substantially if they are situated in strategic locations. For instance, if a plot is close to a highway or in an area where there is a significant investment in developing infrastructure, its value is likely to appreciate, leading to significant profits for the owner. Therefore, investing in open plots can be an excellent way to generate higher returns on investments.
3. Ease of Management
Open plots are an easily manageable investment option, particularly for owners who may not live near their properties. Unlike homes or apartments, open plots do not require regular maintenance, which makes it easier for owners to manage their properties, even from a distance. This means that owners of open plots can avoid the maintenance overheads and other related expenses that come with managing residential properties, making it a more convenient option. Therefore, investing in open plots can provide an easier and hassle-free management experience.
4. Risk Mitigation
Investing in open plots can provide peace of mind to owners as they do not have to worry about the damage caused by trespassers or other risks that come with owning residential properties. Unlike constructed properties, open plots are less vulnerable to damage, making them a safer investment option. Therefore, investing in open plots can provide an added advantage of protection from property damage.
5. Convenient Investment Option
Investing in open plots can be a convenient investment option as it offers a quick and seamless purchase process. Compared to homes, the transaction process of buying an open plot is relatively effortless and straightforward, making it an attractive option for investors. This is because open plots usually have fewer legal and regulatory requirements, which makes the purchase process less complicated. Therefore, investing in open plots can provide an added advantage of an effortless transaction process.
6. Flexible Investment Option
Investing in open plots provides investors with more freedom of choice and flexibility, as vacant land is typically more affordable and can be used for various purposes. Open plots can be used for building homes, farmhouses, or even poultry farms, providing investors with diverse usage options. Unlike constructed properties, open plots allow investors to tailor the construction of their homes according to their needs, preferences, and budget. In contrast, homes and apartments come with predefined designs that may not meet the investors' specific requirements. Additionally, investors can choose their desired neighbourhood while buying open plots, providing them with even more flexibility. Therefore, investing in open plots can provide the added advantage of freedom of choice and flexibility.
Potential Risks of Investing in Open Plots
Investing in open plots comes with the risk of the state or central government acquiring the land without issuing any notice to the owners, especially in India. In such scenarios, owners who have legally purchased the land may need to file petitions in court to get their land back or be compensated as per the market price. Additionally, they must ensure that there are no encroachments on their properties, which can be challenging to monitor from a distance. Therefore, investors must be aware of the risks and take necessary precautions to mitigate them when investing in open plots.
One downside of investing in open plots is the lack of financial assistance available from banks. Unlike homes, banks do not typically offer loans for purchasing open plots that can be repaid in equated monthly instalments (EMIs). Only if the plots are bought from government development authorities, both central and state, will banks lend money. This limited financial support from banks can make it challenging for investors to purchase open plots, particularly if they do not have the necessary funds readily available. As a result, investors should consider their financial options carefully when investing in open plots.
Investing in open plots does not come with the same tax benefits as investing in homes. Homebuyers who take out home loans can avail of tax benefits for repaying both the original amount borrowed and the interest on it, thanks to the benefits provided under Sections 24 and 80C of the Income Act. However, parties who wish to buy open plots are not entitled to any such privileges. This lack of tax benefits can be a significant drawback for investors, and they should consider this when deciding whether to invest in open plots or other real estate options.
Investing in open plots in Hyderabad comes with the downside of the limited availability of land due to high demand from buyers. As a result, the prices of open plots remain high, making it challenging for investors to find suitable and affordable plots in desirable locations. It is important for investors to carefully evaluate the supply and demand dynamics of the Hyderabad real estate market before investing in open plots to avoid paying exorbitant prices for their investments.
Investors looking to invest in open plots in India, including Hyderabad, should be aware of the ambiguous tax provisions that exist in the country. Proper due diligence is necessary to assess the tax implications and potential risks involved in the investment. Failure to do so can lead to unexpected financial losses. Investors should take the necessary precautions to protect their investments and ensure that they understand the tax implications of their investments.
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